Archive - Sep 30, 2010 - Story

Yesterday we received a report submitted from a Spanish blogger who wishes to remain anonymous, in which the author, in 7 brief pages, describes why in his view Spain's GDP is massively overrepresented (and coming just before Moody's downgrade of Spain earlier today). The report (attached below) provides extensive validation for this hypothesis using employment data, information from the service sector, construction output, industry data and foreign sector data. The various data lead the author to observe that: "ΔNational Income= ΔDemand of goods + ΔDemand of services = -56,392 – 11,115 = -67,507 million €, which means a fall of GDP by 24.6% for the biennium 2008-2009." As for where this gets really interesting, is the fact that none other than Goldman has immediately issued a rebuttal of the report. Permabull Erik Nielsen has just released a statement in which he says the report is not to be believed at all, as it "makes little sense." Why is Goldman protesting so much, and focusing on an anonymous report if it has so little credibility?

• Asian stocks slump as banks decline on European concern.
• China will speed up introduction of a trial property tax in some cities.
• China Yuan weakens for first time in 13 days on threat of US trade sanctions.
• China tightens limits on lending, plans tax to cool housing prices.
• Eurozone inflation rate up at 1.8% in September.
• Fed Presidents far from unanimous on need for further easing.
• Gold extends rally to another record after Dollar slumps; Silver tops $22.

Moody's downgrades Spain from AAA to Aa1, a rating which pretty much everyone knew would not last, with the kneejerk reaction nonetheless being to spike bunds. However, as Goldman immediately reminded everyone who cares, this was (supposed to be) "completely priced in." As Erik Nielsen reminds us: "Moody's has just announced that they have downgraded the Spanish government to Aa1 with "stable outlook". This is not really a surprise since they had given themselves until the end of September to consider this rating, and – as I discussed in my Sunday email – there is a good degree of “catch-up” in these ratings. The good news, if that’s the way of putting it, is the “stable” outlook. It appears that Moody’s is getting somewhat impressed with the reform agenda in Spain (as they should be)."

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 30/09/10